Holiday spending: choosing the right card to use overseas

With the holiday season nearing, many people will be planning trips overseas - however, working out the best and most cost effective way to spend while abroad can be confusing, and using the wrong type of card could significantly increase the cost of a holiday.

Independent financial research company Defaqto sets out the charges involved in using debit and credit cards overseas and highlights the cards that do not currently impose additional costs when used abroad.

Defaqto data indicates that the typical cost of using a credit or debit card abroad is as follows:
 
Average charge for a £100 purchase overseas *
Credit card: £2.87
Debit card: £3.06

Average charge for a £100 cash withdrawal from an overseas ATM *
Credit card: £5.60
Debit card: £3.96

* Excludes interest charges

David Black, Defaqto's Insight Analyst for Banking, said: "For most of us, when on holiday our tendency will be to spend a bit more and live life to the full.  However, it is important for people to think about how they will manage their money while abroad to avoid a nasty additional financial shock when they return home.  Cards can be an effective way to spend overseas, but each type of card has its costs and benefits which people need to consider.  In addition, within each card type there is significant variation so it really does pay for people to shop around to get the best option for their needs."

Defaqto offers the following tips to help people manage their spending while abroad:

If paying for something abroad with a debit or credit card it is generally best to get billed in the local currency (rather than sterling) because the exchange rate that your card provider uses will almost always be favourable compared to the exchange rate used by the retailer

When spending a significant amount of money people may prefer to use a credit card due to the additional protection provided by the Consumer Credit Act 1974 - if someone spends £100 to £30,000 on goods or services that are faulty or not delivered the credit card company will be jointly liable with the seller

Use a credit or debit card that does not charge a foreign exchange fee on overseas transactions or a fee for cash withdrawals

As always, holidaymakers should make sure they are aware of all the costs and charges they will incur when using a card before they start using it abroad

Before going abroad people should tell their card provider where and when they are going as this will make it much less likely that their card will be blocked by the provider

Some may prefer to use a prepaid card - which only allows them to spend up to the amount they have put on the card - as a way of controlling their outgoings.  The Euro or Dollar denominated cards offered by FairFx and CaxtonFx have the lowest overseas usage charges

Credit cards

The following credit cards do not currently levy a foreign exchange fee on overseas purchases:

Halifax Clarity Credit Card

Metro Bank Credit Card

Nationwide Building Society Gold Card (no foreign exchange fee charged until 31st July 2011)

Post Office Credit Card

Saga Platinum Credit Card (only available to those aged 50+)

Sainsbury's Gold Credit Card (it charges £5 per month but provides incentives which include free multi-trip family travel insurance)

Santander Zero Credit Card (only available to Santander current account customers)

The following credit cards do not currently charge a fee on cash withdrawals or a foreign exchange fee on overseas transactions:

Halifax Clarity Credit Card (typical 12.9% APR charged on cash advances from the date debited to the cardholder's account)

Metro Bank Personal Credit Card (typical 13% APR charged on cash advances from the date of withdrawal)

Sainsbury's Gold Credit Card (interest free credit on purchases and cash advances if the cardholder repays the entire balance on time every month. It charges £5 per month but provides incentives which include free multi-trip family travel insurance)

Santander Zero Credit Card (typical 27.9% APR charged on cash advances from the date debited to the account - the card is only available to Santander current account customers)

Debit cards

Debit cards which do not charge a fee for purchases or ATM cash withdrawals overseas are available from the following current accounts:

Cumberland Building Society Current Account (only available to people living in Cumbria, North Lancashire, South West Scotland or West Northumberland)

Metro Bank Personal Current Account

Norwich and Peterborough Gold Current Account

Santander Zero Current Account (only available to qualifying Santander mortgage, savings or investment customers)

It is important to note that some independent ATMs or retailers may levy a fee.